QUESTION 1 50 MARKS You have won the lottery and want to decide which investment company to put your money in. Your preference of investment is for a portfolio of stocks. The wisdom of your decision depends on the state of the market. There are three possible states of nature: the market could go down; stay about the same; or it could g ; up. You have narrowed your investment choices to four investment companies. The payous for the various combinations of investment companies and market conditions are shown in the table. Determine the following a) If you are pessimistic which company should be chosen 5 marks b) If you are optimistic which alternative should be chosen 4 marks c) To minimise your opportunity loss which company should you choose 10 marks d) If the you use the LaPlace method which would be the company of choice 6 marks Information about the market suggest probabilities of 40% for up market and equal probabilities for unchanged and down market. e) Which altemative should you choose using the expected monetary value(EMV) criterion? 10 marks f) What is the most you would pay for perfect information 15 marks